State CU and Bank Regulators Endorse Delay In Interchange Rule

Citing concerns about safety and soundness and the well being of smaller financial institutions, trade groups representing state credit union and bank regulators are urging lawmakers to delay the Federal Reserve’s debit interchange rule.

“Congress’ inclusion of the smaller issuer exemption recognized a need to protect smaller institutions from potential economic impact. However, we are concerned that regulations promulgated and taking effect within the law’s timelines would have unintended negative consequences and would not be able to protect those institutions in the manner that Congress intended,’’ NASCUS President/CEO Mary Martha Fortney and Conference of State Bank Supervisors President/CEO Neil Milner wrote to the leaders of Senate and House committees that deal with banking issues.

Fortney and Milner wrote that additional study is needed to ensure that the proposed cap on debit interchange fees is “reasonable and proportional to the cost of the transaction, including fraud detection and prevention.’’

They also note that while it is clear that merchants will benefit from the limit on interchange fees, there is no way to ensure whether these savings will be passed on to consumers.

The Federal Reserve has issued a proposed rule on interchange that is supposed to take effect in July but hasn’t issued a final rule.

Bills have been introduced in the House and Senate that would delay the implementation of the rule and mandate that financial regulators, including the NCUA, study the issue.